J.P. Morgan & Co. sent another shudder through the financial markets Wednesday when it disclosed a significant hit to net income from overseas operations.
"Unsettled market conditions" have eaten into fourth-quarter earnings, producing a slowdown in client activity and lower trading revenues, the New York banking company said.
J.P. Morgan declined to disclose a dollar figure, but some banking observers said the hits were probably in the tens of millions of dollars and could be over $100 million, given Morgan's size and decision to make the disclosure.
"We wouldn't be talking about this right now if the amount wasn't significant," said Thomas Theurkauf of Keefe, Bruyette & Woods Inc.
The late morning announcement sparked a selloff of bank shares and also dragged down the Dow Jones industrial average. J.P. Morgan is one of 30 stocks that make up the widely watched Dow index, which fell 70.87 points, to 7,978.79.
J.P. Morgan shares finished the day down $5, to $117.875. Chase Manhattan Corp. was off $2.6875, to $113.1875. First Union Corp. was down 43.75 cents, to $50.1875, and NationsBank fell 62.5 cents, to $62.125.
"So much for everyone thinking the problems with Asia were behind them," said George Salem at Gerard Klauer Mattison, New York.
J.P. Morgan joined BankBoston Corp. and Chase Manhattan Corp. in disclosing that trading revenue has been less than expected in foreign markets.
Banks are seen as particularly vulnerable because they operate their own units overseas and also lend to foreign businesses and countries. The market is also jittery because of profit shortfalls at Oracle and other bellwether stocks earlier this week.
J.P. Morgan said its drop occurred during October and November and that the hits were "global," suggesting that both Asian and Latin American operations were hit.
Analysts and others with contacts at the company said the hits were harder in November than in October, suggesting that woes may continue at least through the end of this year.
"This was a revenue issue," said Mr. Salem. "Next comes loan quality."
J.P. Morgan made the disclosure late Wednesday morning, as part of a longer statement that heralded a dividend increase, to 95 cents from 88 cents, and plans for a seven million-share buyback for its employee benefit plan.
Some observers said Morgan was being cagey by tucking the overseas woes into a routine corporate release. But the increase in the dividend signals that the company remains confident despite the short-term turmoil, said Diane Glossman, banking analyst at Lehman Brothers. The hit to overseas businesses "is not a situation they expect to impact their progress overall."
She also said that Citicorp, another large bank with significant overseas exposure, will probably surprise people in a positive way when it comes out with its own report on foreign operations.
"Citi doesn't take as much risk in trading as some people might think," Ms. Glossman said.
Other analysts said the selling was overdone, especially in regard to regional banks that have little vulnerability to what happens oceans away. "The fundamentals of these institutions are sound," said Sean J. Ryan at Bear, Stearns & Co., New York. "They have very little exposure."
For the day, the Standard & Poor's bank index 1.60%. The Nasdaq bank index dipped 0.46%, and the S&P 500 was off .61%.
A handful of bank stocks did manage to show gains, including some in the merger spotlight. Shares of Trustmark Corp., Mississippi's largest banking company, rose $1.75, to $44.25, on continued speculation about its future after last week's agreement for its neighbor in Jackson, Miss., Deposit Guarantee Corp., to be bought by First American Corp.
